IMF approves $101 million loan to Malawi for Covid-19 economic woes
International Monetary Fund (IMF) has approved US$101.96 million additional disbursement under the Rapid Credit Facility for Malawi to help the Southern African country address the economic impact of the marauding novel Covid-19 pandemic, the Fund said in a statement.
The decision to release the funds was made by the IMF board at a meeting in Washington on Friday .
In a statement after approving the additional support to Malawi, Tao Zhang, IMF Deputy Managing Director said: “The authorities are actively implementing measures to mitigate the impact of the pandemic and preserve macroeconomic stability.
“The (IMF’s) emergency financing under the second RCF will help close the immediate additional external and fiscal financing gaps.”
Zhang added that further concessional assistance from the international community will be critical to close the remaining external financing gaps during 2020 and 2021 and help ease the adverse economic and social impacts of the pandemic, while preserving Malawi’s hard-earned macroeconomic stability.
Said Zhang: “A widening of the budget deficit is appropriate in the near term, given the fiscal costs associated with the economic slowdown and critical pandemic-related spending, which should be executed transparently and targeted at the most affected segments of society.”
The IMF said, in order to safeguard medium-term debt sustainability and fiscal space for development initiatives, it will be important to formulate medium-term measures now—such as policies that strengthen debt management and boost domestic revenue mobilization, and, implement them once the pandemic abates.
Said Zhang: “The authorities are committed to preserving macroeconomic stability, pursuing reforms in support of higher, more resilient, and broad-based medium-term growth, and improving governance.”
The global lending giant says the Key steps include among others; strengthening the health care system, stepping up social spending, ensuring food security, and easing liquidity constraints in the banking system.
The IMF says the Malawi government has expressed its strong interest in a new Extended Credit Facility arrangement that is aligned with the long-term growth strategy currently under development.
The pandemic is expected to have a significant impact on Malawi, the low-income country, including affecting the near-term economic growth prospects, which appears to be deteriorating significantly.
According to the IMF, Malawi’s economic outlook has worsened since the first RCF as COVID infections have risen and the global and regional economic situation has deteriorated.
This is the second disbursement under the Rapid Credit Facility, which brings total IMF COVID-19 emergency support to Malawi to US$193 million.
This additional financing, the IMF believes will help Malawi fill part of the resulting increased external financing gap and provide the fiscal space needed to address critical spending needs.
The IMF says they believe the Malawian authorities are committed to transparency and accountability to ensure that the RCF resources are used appropriately.
This is the second emergency disbursement since the onset of the pandemic and will help finance Malawi’s urgent balance of payment and fiscal needs.
It follows the Executive Board’s approval of the disbursement of SDR 66.44 million (US$91 million or 47.9 percent of quota) on May 1, 2020.
As a result, external financing needs have substantially increased.
The fiscal situation has also deteriorated with revenue losses and channeling of budget resources toward critical spending, including to support incomes and food security of the most vulnerable and increased health sector outlays—in line with Malawi’s national response plan supported by the World Health Organization and other development partners.
IMF financing under the second RCF will help fill part of the external financing gap and catalyze other concessional financing.
The pandemic is expected to have a significant impact on Malawi including affecting the near-term economic outlook, which has deteriorated significantly.
The Malawi government proactively responded to the pandemic with a national response plan—supported by the World Health Organization and other development partners—and measures to preserve macroeconomic stability while protecting the vulnerable.
In March this year, an International Monetary Fund (IMF) team led by Pritha Mitra, Mission Chief for Malawi, held a mission to conduct the 2020 Article IV Consultation and held discussions on the fourth review of the three-year arrangement for Malawi under the Extended Credit Facility (ECF) arrangement.
At the end of the mission, the IMF lead in Malawi Mitra said: “The key risk is the potential for deeper disruption to economic activity in Malawi from the spread of COVID-19.”
Malawi’s main export is tobacco, which makes up about half of export earnings, alongside other crops such as tea and sugar.
The country joined the IMF on July 19, 1965 just soon after attaining her independence from her colonial masters, the British.
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Thank you IMF, we will use the help for what it is intended for unlike the DPP government that swindled all the money
Mr VP this is the main reform we need to do as a country. We need to get rid of these institutions. IMF and world Bank. We can’t be operating on katapila. Let’s tighten our belts and use our own resourses. That’s True independence
That is the ultimate goal of the current leadership/administration but we need assistance while we clear the mess left by the DPP and recover the monies stolen by Aa Dadi ndi ana awo
Whilst this is great news, Govt needs to demonstrate that the earlier disbursement have been utilised for their intended purposes. Since the outbreak of the pandemic, alot of resources from different sources meant for the fight against the pandemic and crucially, the chunck that is meant to cushion the worst affected citizens and sectors of the economy should be disclosed. The Govt hasn’t been transparent and accountable enough in disclosing how the resources have been utilised. This has got to be done! This far Govt is making the right noise, despite some mishaps here and there, however theyve underperfomed when… Read more »
Ask Jappie and Botoman
No need, they are spent forces, and we’ve given the boot! Just waiting, just maybe, whether they will be implicated in the so many shady deals and gets to taste the coolers! If they are MPs i doubt there contribution in the chambers, and if i was speaker i would kick them out at will!!! lolset! Useless thugs! How they found their way to such positions is a puzzle, but it tells you how our system has been discredited and rotten to the core. The six years of the past regime are the worst ever!